2.2.0.25falsefalse10301 - Disclosure - Significant Accounting Policiestruefalsefalse1falsefalsefalsefalse1/1/2010 - 12/31/2010
Duration_1_1_2010_To_12_31_2010http://www.sec.gov/CIK0001043382duration2010-01-01T00:00:002010-12-31T00:00:002true0us-gaap_GeneralPoliciesAbstractus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsefalsefalseOtherxbrli:stringItemTypestringNo definition available.falsefalse3false0us-gaap_SignificantAccountingPoliciesTextBlockus-gaaptruenadurationNo definition available.falsefalsefalsefalsefalsefalsefalsefalsefalsefalseterselabel1falsefalsefalse00<div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt"><font style="display: inline; text-decoration: underline;" class="_mt">3. Significant Accounting Policies</font></font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Basis of Consolidation</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The consolidated financial statements are presented in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). These statements pertain to Solutia and its majority-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Use of Estimates</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements which affect revenues and expenses during the period reported. Estimates are adjusted when necessary to reflect actual experience. Significant estimates and assumptions affect many items in the financial statements. These include restructuring reserves, environmental reserves, self-insurance reserves, valuations of goodwill and other identified intangible assets, employee benefit plans, income tax liabilities and assets and related valuation allowances, inventory obsolescence, asset impairments, valuation of share-based compensation, litigation and other contingencies and the allocation of corporate costs to segments. Significant estimates and assumptions are also used to establish the fair value and useful lives of depreciable tangible and finite-lived intangible assets. Actual results may differ from those estimates and assumptions, and such results may affect income, financial position or cash flows.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Cash and Cash Equivalents</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Cash and cash equivalents consist of cash and temporary investments with maturities of three months or less when purchased.
</font>
<div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Trade Receivables</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The provision for losses on uncollectible trade receivables is determined on the basis of past collection experience, current economic and market conditions and a review of the current status of each customer's trade receivable balance.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Inventory Valuation</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Inventories are stated at cost or market, whichever is less, with cost being determined using standards, which approximate actual cost. Variances, exclusive of unusual volume and operating performance, are capitalized into inventory when material. Standard cost includes direct labor and raw materials, and manufacturing overhead based on normal capacity. Effective in 2010, the cost of all consolidated inventories is determined using the FIFO method. For further detail, see Note 7 – Detail of Certain Balance Sheet Accounts.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">We record abnormal amounts of idle facility expense, freight, handling costs and wasted material (spoilage) as current period charges.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Property, Plant and Equipment</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Property, plant and equipment are recorded at cost and depreciated on a straight-line basis over their respective estimated useful lives. In connection with our adoption of fresh-start accounting, we adjusted the net book values of property and equipment to their estimated fair values and revised the estimated useful life of machinery and equipment. The estimated useful lives for major asset classifications are as follows:</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify">
<table style="font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%">
<tr><td style="padding-bottom: 2px;" valign="top" width="26%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td style="padding-bottom: 2px;" valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font></td>
<td style="border-bottom: black 2px solid;" valign="top" width="54%" colspan="3">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"><font style="display: inline;" class="_mt">Estimated Useful Lives</font></font></div></td></tr>
<tr><td style="border-bottom: black 2px solid;" valign="top" width="26%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"><font style="display: inline;" class="_mt">Asset Classification</font></font></div></td>
<td style="padding-bottom: 2px;" valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font></td>
<td style="border-bottom: black 2px solid;" valign="top" width="26%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"><font style="display: inline;" class="_mt">Successor</font></font></div></td>
<td style="padding-bottom: 2px;" valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font></td>
<td style="border-bottom: black 2px solid;" valign="top" width="27%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"><font style="display: inline;" class="_mt">Predecessor</font></font></div></td></tr>
<tr><td valign="top" width="26%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="26%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="27%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td></tr>
<tr bgcolor="#cceeff"><td valign="top" width="26%" align="left">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Buildings and Improvements</font></div></td>
<td valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="26%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">5 to 35 years</font></div></td>
<td valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="27%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">5 to 35 years</font></div></td></tr>
<tr bgcolor="white"><td valign="top" width="26%" align="left">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Machinery and Equipment</font></div></td>
<td valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="26%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">5 to 20 years</font></div></td>
<td valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="27%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">3 to 15 years</font></div></td></tr></table></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Goodwill and Intangible Assets</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Goodwill reflects the excess of the reorganization value of the Successor over the fair value of tangible and identifiable intangible assets, net of liabilities resulting from our adoption of fresh-start accounting. Goodwill and other intangible assets with indefinite lives are not amortized but are tested for impairment as of November 30 of each year or more frequently when an event occurs or circumstances change such that it is reasonably possible that impairment may exist.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">We test goodwill for impairment by first comparing the carrying value of each reporting unit, including goodwill, to its fair value. The fair value of our Technical Specialties and Advanced Interlayers reporting units is determined considering both the market and income approaches. The fair value of our Performance Films reporting unit is determined utilizing the income approach. Under the market approach, fair value is based on a comparison of similar publicly traded companies and/or completed market transactions. Under the income approach, fair value is determined using an estimate of future cash flows of the reporting unit and a risk-adjusted discount rate to compute a net present value of future cash flows. If the fair value is determined to be less than carrying value, a second step is performed to compute the amount of impairment, if any. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the net fair values of recognized and unrecognized assets and liabilities of the reporting unit. We test intangible assets with indefinite lives for impairment through comparison of the fair value of the intangible asset with its carrying amount. The fair value of intangible assets with indefinite lives is determined using an estimate of future cash flows attributable to the asset and a risk-adjusted discount rate to compute a net present value of future cash flows. The shortfall of the fair value below carrying value represents the amount of impairment. See Note 6 – Goodwill and Other Intangible Assets – for further discussion of the annual impairment test.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Intangible assets that have finite useful lives are amortized over their determinable useful lives on a straight-line basis and assessed for impairment in accordance with our Impairment of Long-Lived Assets accounting policy. The estimated useful lives are as follows:</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify">
<table style="font-family: times new roman; font-size: 10pt;" cellspacing="0" cellpadding="0" width="100%">
<tr><td style="padding-bottom: 2px;" valign="top" width="26%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td style="padding-bottom: 2px;" valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font></td>
<td style="border-bottom: black 2px solid;" valign="top" width="55%" colspan="3">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"><font style="display: inline;" class="_mt">Estimated Useful Lives</font></font></div></td></tr>
<tr><td style="padding-bottom: 2px;" valign="top" width="26%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td style="padding-bottom: 2px;" valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font></td>
<td style="border-bottom: black 2px solid;" valign="top" width="27%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"><font style="display: inline;" class="_mt">Successor</font></font></div></td>
<td style="padding-bottom: 2px;" valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font></td>
<td style="border-bottom: black 2px solid;" valign="top" width="27%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt; font-weight: bold;" class="_mt"><font style="display: inline;" class="_mt">Predecessor</font></font></div></td></tr>
<tr><td valign="top" width="26%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="27%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="27%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td></tr>
<tr bgcolor="#cceeff"><td valign="top" width="26%" align="left">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="left"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">Finite-Lived Intangible Assets</font></div></td>
<td valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="27%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">3 to 27 years</font></div></td>
<td valign="top" width="1%"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt"> </font></td>
<td valign="top" width="27%">
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="center"><font style="display: inline; font-family: times new roman; font-size: 10pt;" class="_mt">5 to 25 years</font></div></td></tr></table></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br />
<div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">On a quarterly basis, the useful lives of these assets are evaluated to determine whether events or circumstances warrant a revision to the remaining period of amortization. If an estimate of the useful life is changed, the remaining carrying amount of the asset will be amortized prospectively over the revised remaining useful life.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Impairment of Long-Lived Assets</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Impairment tests of long-lived assets are performed when conditions indicate the carrying amount may not be recoverable. Impairment tests are based on a comparison of undiscounted cash flows to the recorded value of the asset. If impairment is indicated, the asset value is written down to its fair value based upon market prices or, if not available, upon discounted cash value, at an appropriate discount rate.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Environmental Remediation</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Costs for remediation of waste disposal sites are accrued in the accounting period in which the obligation is probable and when the cost is reasonably estimable based on current law and existing technology. Environmental liabilities are not discounted, and they have not been reduced for any claims for recoveries from third parties. In those cases where third-party indemnitors have agreed to pay any amounts and management believes that collection of such amounts is probable, the amounts are reflected as receivables in the consolidated financial statements.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Litigation and Other Contingencies</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">We are a party to legal proceedings involving intellectual property, tort, contract, antitrust, employee benefit, environmental, government investigations and other litigation, claims and legal proceedings. We routinely assess the likelihood of adverse judgments or outcomes to those matters, as well as ranges of probable losses, to the extent losses are reasonably estimable. Potential losses are recorded to the extent that we conclude their occurrence is probable and the financial impact, should an adverse outcome occur, is reasonably estimable. When a single amount cannot be reasonably estimated but the cost can be estimated within a range, we accrue the low end of the range. In addition, we accrue for legal costs expected to be incurred with a loss contingency.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Disclosure for specific legal contingencies is provided if the likelihood of occurrence is at least reasonably possible and the exposure is considered material to the consolidated financial statements. In making determinations of likely outcomes of litigation matters, we consider many factors. These factors include, but are not limited to, past experience, scientific and other evidence, interpretation of relevant laws or regulations and the specifics and status of each matter. If the assessment of the various factors changes, the estimates may change and could result in the recording of an accrual or a change in a previously recorded accrual.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Self-Insurance and Insurance Recoveries</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">We maintain self-insurance reserves to reflect our estimate of uninsured losses. Self-insured losses are accrued based upon estimates of the aggregate liability for claims incurred using certain actuarial assumptions followed in the insurance industry, our historical experience and certain case specific reserves as required, including estimated legal costs. The maximum extent of the self-insurance provided by us is dependent upon a number of factors including the facts and circumstances of individual cases and the terms and conditions of the commercial policies. We have purchased commercial insurance in order to reduce our exposure to workers' compensation, product, general, automobile and property liability claims. This insurance has varying policy limits and deductibles.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Insurance recoveries are estimated in consideration of expected losses, coverage limits and policy deductibles. When recovery from an insurance policy is considered probable, a receivable is recorded.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Foreign Currency Translation</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">The local currency has been used as the functional currency for nearly all worldwide locations and is translated into U.S. dollars at current or average exchange rates. Unrealized currency translation adjustments are included in accumulated other comprehensive loss in the Consolidated Statement of Financial Position.</font></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify">
<div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Derivative Financial Instruments</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">All derivatives excluding those which qualify for exception, whether designated for hedging relationships or not, are recognized in the Consolidated Statement of Financial Position at their fair value.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify">
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Currency forward and option contracts are used to manage currency exposures for financial instruments denominated in currencies other than the respective entity's functional currency.<font style="display: inline; font-weight: bold;" class="_mt"> </font>We have chosen not to designate these instruments as hedges and to allow the gains and losses that arise from marking the contracts to market to be included in other income, net in the Consolidated Statement of Operations.</font></font></div>
<div style="text-indent: 0pt; display: block;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><br /></font></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Interest rate caps and swaps are used to manage interest rate exposures on variable rate debt instruments. To the extent interest rate caps and swaps qualify for hedge accounting, we designate them as cash flow hedges and the mark-to-market gain or loss on qualifying hedges is included in accumulated other comprehensive loss in the Consolidated Statement of Financial Position to the extent effective, and reclassified into interest expense in the Consolidated Statement of Operations in the period during which the hedged transaction affects earnings. The mark-to-market gains or losses on swaps not designated as cash flow hedges, as well as the ineffective portions of hedges, are recognized in interest expense immediately.</font></font></div><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Revenue Recognition</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Our primary revenue-earning activities involve producing and delivering goods. Revenues are considered to be earned when we have completed the process by which we are entitled to such revenues. Criteria used for revenue recognition are persuasive evidence that an arrangement exists, delivery has occurred, selling price is fixed or determinable and collection is reasonably assured.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Shipping and Handling Costs</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Amounts billed for shipping and handling are included in net sales and the costs incurred for these activities are included in cost of goods sold in the Consolidated Statement of Operations.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Distribution Costs</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">We include inbound freight charges, purchasing and receiving costs, inspection costs, warehousing costs, internal transfer costs and the other costs of our distribution network in cost of goods sold in the Consolidated Statement of Operations.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Income Taxes</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">We account for income taxes using the asset and liability method. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities at enacted rates. We determine the appropriateness of valuation allowances in accordance with the "more likely than not" recognition criteria.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">We recognize tax positions in the Consolidated Statement of Financial Position as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon ultimate settlement with tax authorities assuming full knowledge of the position and all relevant facts. Accrued interest and penalties related to unrecognized tax benefits are included in income tax expense in the Consolidated Statement of Operations.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Earnings (Loss) per Share</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">Basic earnings (loss) per share is a measure of operating performance that assumes no dilution from securities or contracts to issue common stock. Diluted earnings (loss) per share is a measure of operating performance by giving effect to the dilution that would occur if securities or contracts to issue common stock were exercised or converted. To the extent that stock options, non-vested restricted stock and warrants are anti-dilutive or the performance and market conditions on the shares have not been met as of the end of the reporting period, they are excluded from the calculation of diluted earnings per share.
</font>
<div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="left"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt"> </font> </div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="left"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Share-Based Compensation</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">We measure compensation cost for all share−based awards at fair value on the date of grant. The fair value of stock options is determined using the Black−Scholes valuation model<font style="font-style: italic; display: inline;" class="_mt">. </font>Such value is recognized as expense over the service period, net of estimated forfeitures, using the straight-line method.</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="font-style: italic; display: inline; font-family: Times New Roman; font-size: 10pt; font-weight: bold;" class="_mt">Recently Issued and Adopted Accounting Standards</font></div>
<div style="text-indent: 0pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><br /></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify">
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">In January 2010, the FASB issued Accounting Standards Update ("ASU") 2010-06 <font style="font-style: italic; display: inline;" class="_mt">Fair Value Measurements and Disclosures (Topic 820): Improving Disclosures about Fair Value Measurements </font>("ASU 2010-06"). ASU 2010-06 amends ASC 820 <font style="font-style: italic; display: inline;" class="_mt">Fair Value Measurements and Disclosures</font> ("ASC 820") to require new disclosures related to transfers into and out of Levels 1 and 2 of the fair value hierarchy and additional disclosures about purchases, sales, issuances and settlements related to Level 3 measurements. The guidance also clarifies existing fair value measurement disclosures about the level of disaggregation and about inputs and valuation techniques used to measure fair value. The additional disclosure requirements are effective for the first reporting period beginning after December 15, 2009, except for the additional disclosure requirements related to Level 3 measurements which are effective for fiscal years beginning after December 15, 2010. Accordingly, we adopted the requirements of this guidance effective January 1, 2010. The adoption of the additional requirements of ASU 2010-06 did not have any impact on our consolidated financial statements and the additional disclosure requirements can be found at Note 12 – Pension Plans and Other Postretirement Benefits.</font></font></div>
<div style="text-indent: 0pt; display: block;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><br /></font></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">In September 2009, the FASB issued ASU 2009-12 <font style="font-style: italic; display: inline;" class="_mt">Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities that Calculate Net Asset Value per Share</font> ("ASU 2009-12"), which amends ASC 820 to provide clarification on the measurement and disclosure of investments in certain entities that calculate net asset value per share ("NAV"). The measurement and disclosure requirements of ASU 2009-12 are effective for the first reporting period ending after December 15, 2009. Accordingly, we adopted the requirements of this guidance effective October 1, 2009. The adoption of the guidance did not have any impact on our consolidated financial statements and the additional disclosure requirements can be found at Note 12 – Pension Plans and Other Postretirement Benefits.</font></font></div>
<div style="text-indent: 0pt; display: block;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><br /></font></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">In June 2009, the FASB issued the ASC to serve as the sole source of authoritative United States accounting and reporting standards applicable for all non-governmental entities, with the exception of the Securities and Exchange Commission ("SEC") and its staff. The ASC changes the referencing of financial standards but is not intended to change U.S. GAAP. This standard is effective for interim or annual financial periods ending after September 15, 2009. Since the ASC did not alter existing U.S. GAAP, it did not have any impact on our consolidated financial statements.</font></font></div>
<div style="text-indent: 0pt; display: block;"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><br /></font></div>
<div style="text-indent: 36pt; display: block; margin-left: 0pt; margin-right: 0pt;" align="justify"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt"><font style="display: inline; font-family: Times New Roman; font-size: 10pt;" class="_mt">In March 2008, the FASB issued guidance, referenced in ASC 815 <font style="font-style: italic; display: inline;" class="_mt">Derivatives and Hedging</font> ("ASC 815"), which requires enhanced disclosures about a company's derivative instruments and hedging activities and was effective for fiscal years beginning after November 15, 2008. The adoption of ASC 815 on January 1, 2009 did not have any impact on our consolidated financial statements and the additional disclosures can be found at Note 10 – Derivatives and Risk Management.</font></font></div><br /></div></div></div></div></div></div></div></div></div> </div>3. Significant Accounting Policies
Basis of Consolidation
The consolidated financial statements are presented in accordance with accounting principlesfalsefalsefalsefalsefalseOtherus-types:textBlockItemTypestringThis element may be used to describe all significant accounting policies of the reporting entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher AICPA
-Name Accounting Principles Board Opinion (APB)
-Number 22
-Paragraph 8
falsefalse12Significant Accounting PoliciesUnKnownUnKnownUnKnownUnKnownfalsetrue